- Recovering commercial debt could become even more of a challenge as business insolvencies remain high in most countries while global fragmentation rises amid a reconfiguration of the trading system, volatile protectionism, geopolitical uncertainties and higher digital risk. In the fourth edition of the Allianz Trade Collection Complexity Score and Rating, we provide a simple assessment of how easy it is for companies to recover their dues in 52 economies that represent 90% of both global GDP and global trade. This year’s edition includes six new economies: Egypt, Peru, Serbia, South Korea, Taiwan and Vietnam.
- Considering local payment practices, court proceedings and insolvency frameworks, we find that Germany, the Netherlands and Portugal are the three best countries to recover international debt, while Saudi Arabia, Mexico and the United Arab Emirates are lagging behind. International debt collection is almost three times more complex in Saudi Arabia than in Germany, but the latter is not without complexities in terms of international collection. Globally, collection complexity stands at ‘High’ level of 47.2 on our 0-100 scale.
- In the past four years, three out of five countries in our sample have seen a change in their collection complexity score, with an almost equal balance between improvements and deteriorations. Decreases in collection complexity (16) occurred notably among the most complex countries such as Saudi Arabia, the UAE and China, but they were large enough to lead to an improved rating in only five countries: Malaysia, Colombia, Turkey, Greece and Singapore. Conversely, we noticed increases (15) in collection complexity most often proved to be moderate – particularly in Australia, Belgium, Senegal and the US – but they led to a change in rating in Thailand and New Zealand. In that context, the gap between advanced economies and emerging markets has been gradually reducing over time, notably in Asia, but it remains in place. Most advanced economies have a ‘notable’ level of collection complexity, while the US and Canada both post a ‘Very High’ rating. On average, Middle East and Africa are the top two most complex regions.
- Pockets of collection complexity exist in all countries, including the largest economies, most dynamic markets and less vulnerable countries in terms of country risk. Local payment practices in particular stand out for the Middle East but they are also a source of complexity in most countries. Court-related complexities are less frequent within Western Europe than in the Middle East, Africa and Latin America. Yet, insolvency proceedings still account for the bulk of collection complexity in all regions, ranging from 46% in Asia to 58% in Western Europe.
- At this stage, e-invoicing practices have not yet simplified collection. Despite its clear benefits, e-invoicing has rolled out unevenly across Europe, creating a patchwork of national systems and timelines. This fragmented landscape means cross-border businesses face a complex compliance puzzle in the short term. Each country has had its own formats and different go-live dates. However, relief is in sight: In early 2024, European legislators reached agreement on the “VAT in the Digital Age” (ViDA) reforms, which will harmonize e-invoicing across the EU in the coming years and by 2030.
- Asia and Latin America stand out as the regions where exporters are most exposed to international debt collection complexity due to a high share of trade with countries that have high collection complexity. The list includes India, Japan, Peru, Colombia, Mexico, Vietnam, Brazil and Thailand. In contrast, Austria, Finland and Sweden lead the list of countries less exposed. Notably, new trade routes and hubs emerging from the ongoing reconfiguration of the global trading system such as the UAE, Vietnam and Malaysia are particularly exposed, on average, to the complexities of export debt recovery. This calls for selectivity and closed credit management as it adds traditional risks such as country risk.
- Overall, we estimate that 48% of international trade receivables are in countries at ‘Very High’ risk (22%) or ‘Severe’ risk (26%) of collection complexity. Compared to 2022, this represents a limited increase in relative terms (+1pp at stable sample), but an expanding amount (USD1.1trn) due to the rise in global trade. Depending on countries, international debt receivables represent between 10% and 25% of total trade receivables (domestic + international), with a lower share of international trade receivables in countries with higher collection complexity – and vice versa.